Coping With the Risk Cycle

When things are going well, investors swing to excessive euphoria under the assumption that everything's good and can only get better. When things are bad, they swing toward depression and panic, viewing everything negatively and assuming it can only get worse. In order to be a successful contrarian, you have to do the opposite of what the herd does. The last believer loses faith in the market, selling accelerates, and prices reach their nadir.